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Thank you all for standing by, and welcome to the Lynas Quarterly Investor Briefing. [Operator Instructions]
I'd now like to hand the conference over to Lynas. Thank you. Please go ahead.
Good morning, and welcome to the Lynas Rare Earths Investor Briefing quarter ending 31 March 2022. Today's briefing will be presented by Amanda Lacaze, CEO and Managing Director. And Amanda is joined by Gaudenz Sturzenegger, CFO; Pol Le Roux, VP, Downstream; Daniel Havas, VP, Strategy and Investor Relations; and Sarah Leonard, General Counsel and Company Secretary. Please go ahead, Amanda.
Hello. Good morning, everybody. Well, I know that not everybody who is on the call is Australian and not everybody who is on the call who is Australian even follows the AFL. But in the AFL, in the grand finals, the third quarter is often known as the championship quarter. This is one of the quarters when one team lifts and runs with the wind behind their back to a big win. Often, as you listen to the commentators, they say, "What a blinder of a quarter." And I have to say I can't think of a better way to describe our third quarter than what a blinder.
I'm tempted to just stop there and then say, are there any questions, but just to pick out a few of the high points, of course. $328 million in revenue, $262 million received in cash. But I guess the thing that will have surprised most was the 1,687 tonnes of NdPr as we had the plant running very well, but we've sort of indicated that for some time now. But really, a lot of the tactics and strategies that we put in place to manage our business in the face of continuing external unpredictability certainly has given us the position where we're able to sort of keep things running really on a sustainable and steady basis.
So all of these results are on the shoulders of our teams in both Australia and Malaysia. The Malaysian performance is really, really outstanding. When we consider that I think we're up to the fifth wave of COVID in Malaysia, we've had up to 40% of our people despite being sort of highly vaccinated. Certainly, we've had up to 40% of our people with COVID during that period of time. And of course, in Australia, in Western Australia, we're still managing a very sort of resource intensive management of COVID with -- in both locations, we still got twice or 3 -- thrice weekly testing regime. But really, the Malaysian performance was really outstanding, notwithstanding some of those challenges. And I've indicated on these calls previously the addition of charter vessels to ensure that we have feedstock on hand in Malaysia, so we can keep that factory running full bore.
Mt Weld has kept pace with the improved performance in Malaysia. However, our key focus there is on further debottlenecking the operation to really squeeze every last bit out because we're very alert to the fact that we need to continue to be building a stockpile for the period of time when we're feeding 2 cracking and leaching plants.
As the results demonstrate, our projects remain in good shape with -- this is not new news because we reported at the half year and, of course, in other disclosures to the ASX, but we've received key approvals all of the approvals in WA and work on the Kalgoorlie facility is continuing at pace. We've included some photos for those who aren't able to get to Kalgoorlie, which I think shows you really just how significant the progress on-site is with all of the site now cleared, all of the kiln pieces there. The footings are in place. We've got a lot of tanks which are on-site now. And the team, despite the occasional sort of absence related to COVID, the team on the ground is really delivering a really outstanding performance.
I think everybody would know that there's lots of maybe a balance of many, particularly in the past few couple of weeks about continued government support and focused on continuing development of critical mineral supply chains outside of China.
I think it is really important to note that even with sort of a perfect project execution, lead times to new supply are quite long. And today and for the foreseeable future, the non-Chinese supply source are separated. Rare earths comes from our Malaysian facility. We're very alert to the importance of that facility for outside China industries and so very focused on continuing to develop our capability there.
At the same time, and as I've indicated previously, we're very focused on how do we grow faster to meet the accelerating market demand. And we're very pleased that the deferral of our interest, our historical interest liabilities with JARE is really an indication about continuing to develop that relationship as we look at the sorts of investments that we're going to need to make over the next couple of years. It includes significant exploration program at Mt Weld as well as an upgrade to the facilities there and an upgrade to sort of our capacity to separate rare earths in maybe 1 or more locations.
There's also quite a lot of media associated with Minister Tehan's trade delegation to the U.S. We had 2 of our senior staff join that delegation and they had excellent engagement with the U.S. government, both as part of the mission and independently as we reviewed elements of our expansion plans into the U.S.
So I don't really need to say, I think, a lot more, I'm sure that there will be questions. But a really excellent quarter. I think, again, evidence of the fact that we've said for some time that when the rare earths price strengthened, when demand strengthened, that we would be in pole position. That's a number of reference to race on the weekend in Melbourne, but anyway, we're in pole position to take advantage of that growth, and our results indicate that.
So with that as sort of introductory comments, I'm happy to take any questions.
[Operator Instructions] Our first question comes from David Deckelbaum at Cowen.
They refer to something as a blinder for the first time in my life. So kudos on a good quarter.
I felt I had to give some context to that because it may not be a term that everybody else knew.
It's not every day you get a cultural experience with equity research. But that being said, I did want to dig in a little bit more for some color around some of the conversations with Japan and the JARE loan were with the interest sort of being deferred now. You talked about, obviously, there seems to be ongoing conversations around expanding capacity outside of China. You mentioned 1 or 2 more sites. I suppose that one of these sites would be potentially expanding capacity in Malaysia. And just wondering if you could provide any more clarity on how quickly something like that might come to pass.
Yes, sure. Thanks, David. So yes, I think that any time that you're talking about a brownfield expansion, it is going to be a much shorter time to market than a greenfield development.
So for example, and particularly as people are looking at sort of other projects, the proposed projects, when you think about our Kalgoorlie facility, it's had major project status with the federal government, lead agency status with the WA government, really a high priority, very supported project. But the simple process is that there are approvals, processes and studies and all of those things that need to be complete. And so from go to woe, bearing in mind that we actually really know what we're doing, the team who are building this plant have [indiscernible] the Malaysian plant and operated the Malaysian plant. We're still talking about sort of from when we, as a company, absolutely had clarity on what we were going to do to when we think we'll have to feed on is probably close to 3 years.
So as we think about this, any greenfield side is going to have sort of challenges and a longer lead time than a brownfield's expansion. As we seek to keep pace with our customers' demand, certainly, the opportunities to drive greater production outcomes in Malaysia is part of the mix of the projects that we're looking at.
And we would expect that sometime within the next few months that we will come back with a sort of a firmer pathway that will see us being able to deliver better outcomes even than our Lynas 2025 vision. But our view on this is that we don't tell the market that we're going to do something until we know exactly how we're going to get there. We're doing that work at present.
Well, it sounds like that there's sort of an imminent path ahead where we might learn something more resolute in the next few months, so that's certainly engaging. My follow up is just..
Yes. I know that lots of people like to sell blue sky. We actually like to sell confirmed plant.
Yes. Fair enough. My follow-up is just on the run rate. You all obviously pointed out March having -- running at 600 tonnes of separated NdPr. It's amongst the highest levels we've seen from you all in several years. I guess as we think about the remainder of the year, and I know we're going into conversations around increasing capacity, is there enough debottlenecking work at Mt Weld right now to sort of feed that run rate assuming everything is functioning properly kind of the rest of this fiscal year?
That's our objective. We have some additional work that we're doing at Mt Weld because [indiscernible] we're trying not only to feed the improved production rates in Malaysia, but to build the stockpile ahead of the feed on -- in Kalgoorlie. And so the team in Mt Weld is very focused on the 1 or 2 areas which, really, if we can release those bottlenecks will give us improved production there as well. But under any circumstance, we need to increase our production at Mt Weld. And so we have a project team, amongst our best and brightest, actually working on exactly what does that look like and how fast can we get that done. And in the areas where we know that we really need to get a big step-up in throughput, we actually have already placed some of our long lead time items because none of these things can you spend on a dime. See, that's a term you would know in the U.S. But we can't do that, so we're sort of looking to be ahead of the curve at present in terms of making sure that we've got those things that are going to take the longest time to get on-site actually ordered well ahead of time.
I appreciate the responses and here's to many blinders ahead.
We like blinders. There's another not so very polite term that is used in Australia as well, but I'm not going to use it on this call.
Our next question comes from Paul Young at Goldman Sachs.
Amanda, cracking quarterly, no doubt. I'd like to hear the sporting analogy, so that was enjoyable. Amanda, just the first one is around performance of lamp and looking at the fact that it produced over 600 tonnes of NdPr in the month of March. That's a great result because I thought capacity was 7,200 tonnes per annum now. Probably you can't annualize it, but I'm just wondering, just based on that performance, what do you think is the true nameplate of this refinery as it stands now?
I'm not going to change from our guidance, which is actually 7,000 sort of plus or minus. It certainly -- I know that we've talked previously about 600 tonnes a month. Currently, you mostly need to have a month with 31 days in it to have a good shot at 600 tonnes. A 28-day month is a bit tough, although I tell the team I still expect them to do it. We had ongoing preventive maintenance. Sometimes with the kilns in particular, we have every 18 months, we have an inspection of -- we have to shut down for a major inspection, those sorts of things. So that's why we sort of say 7,000 -- sort of approximately 7,000 tonnes a year, which takes account that there are some months where it will be difficult for either sort of maintenance, inspection or the fact that the short amounts, it will be difficult to get to the 600. The team did a really sort of outstanding result in March, and the result was actually relatively well advanced from the 600 tonnes. But can we do that every single month? Probably not because we have to manage these other things.
But I think that our indication of around about that annualized number is definitely within reach so long as we manage all of the variables as efficiently as possible.
Yes, that's great. That was a great performance. And then the next question, Amanda, is on just the NdPr mix, which for the quarter, just simple maths, 34% within the product mix, which is obviously a lot higher than what the resource sits at sort of mid-20s. And obviously, you're going through a high higher percentage in NdPr part of the stockpiles. But how much of it is actually the fact that you're mining through a higher assemblage of NdPr versus the fact that you might be stockpiling the lower value material and just not selling it?
Yes. No, we preference the production of the higher-value material through the lab. And so one of the things that we did -- when I talk about sort of some of our COVID challenges in Malaysia, our biggest challenge through the quarter was actually with our workforce in our product finishing area. And so particularly in February, I think we really had some challenges getting enough people to man particularly in our dry area of product finishing, but even amongst our process engineers.
And so we have 8 tunnel furnaces. Generally, we have 4 of those, which are dedicated to NdPr production or Nd or Pr production. In March, we brought a fifth tunnel furnace into operation to ensure that we were able to sort of move through all of the material that sort of the upstream SX and cracking and leaching had produced so that we could move that through our product finishing area. So it's not a reflection of high grading the resource, it is a reflection of sort of production choices.
That makes sense. Okay. And that, therefore, it's actually more sustainable over the medium term, I gather.
Well, look, we produced our La and Ce to meet the market. We -- and it shouldn't -- I know that it's very easy to sort of dismiss them as just being sort of the lower cost items, but as we look at our business and we look at our sort of cost per kilo of NdPr produced, the La and Ce and indeed the SEG become credits against that cost base. So finding ways to really improve the -- every extra dollar that we get in those is really sort of drops through to the bottom line.
And we've been -- the sales team and the production team has been working very hard to achieve over sort of the market benchmark prices for those materials. We had over -- we had 7 different contracts, which actually give us significantly over market benchmark prices in that area. But having said that, they don't equate to the same amount of, say, cerium in particular, that we can produce within the natural profile. So we do produce to ensure that we meet the needs of those contracted customers. But if that then gives us the space to be able to prioritize additional production of NdPr, then that's what we do.
Yes. That makes sense, Amanda. Last one for me is probably on the market and demand outlook, Amanda, just looks like it just keeps on getting better and better, the outlook. Just an observation and then maybe comment for me around the long-run supply-demand balance. Considering last week, we saw Iluka announced potentially 5,000 tonnes of NdPr production from around 2025 onwards and you're looking at bigger expansion plans [ you're comfortable with it ]. Or both of you are really just feeding into a market deficit?
So fortunately, we've got Paul on the call this morning, and Paul is our expert on the market. Having said that -- so he'll talk a little about the market. With respect to your comment about sort of Australian production increasing. Yes, that we're pleased to see the Australian critical minerals industry continuing to develop. I think I've said previously that the market is positive, and there's room for many winners. Our job is to make sure that we win more than anybody else. But I'll let Pol make some comments on the market in general.
Well, I was on business trip for the last several weeks. I confirm that demand is -- remains very strong for especially electric cars and wind turbines. And knowing that electric car's production is a bit limited by the chip semiconductors shortage that people expect to ease in the second half of this year, hopefully. So basically, new supply -- we don't see new supply coming up in the very short term. Meanwhile, the focus for everyone in the place to produce more because the demand is increasing very fast. And we'll continue to do so for the next at least a year or several years. So we have no doubt on that. The demand remains very strong, and we will be in the tight supply situation for quite a while.
Our next question comes from Hayden Bairstow at Macquarie.
I'll leave the [ full ] analogies for now. But just a couple of questions, just following up on what Paul was talking about. I mean there's clearly some interesting demand changes, particularly in the wind market, really, what we said in the last few weeks. It's interesting to see what, if you're seeing an accelerated sort of order book. We've seen a number of wind projects approved, particularly in Europe, in the last 2 or 3 months. And just facing that versus what we've seen in the spot market on NdPr prices, just -- is that just an indication that China is moving towards its quota? Are we getting a bit more volume recovery from them post the Chinese new units that sort of ease things back a little bit? Just keen to understand the differences between what looks like a really sort of accelerating demand story in particularly from the wind market versus the pullback in spot prices.
So once again, I might give Pol a chance to respond to that.
I think it's the other way around. I mean the demand does not grow because there is more supply. There is more supply because we all try to produce more, including Chinese and Lynas, because the demand is increasing.
And wind turbine project increased substantially. And I guess, you include U.K. and Europe when you say new projects in Europe, which is geographically correct. But I think all the west -- or all the world is very concerned about accelerating other resource for energy. I was attending a conference in Paris from the International Energy Agency. And all the focus is to secure as fast as possible security of supply, knowing how much gas is imported into Europe from Russia today. So that is a big boost for new energy investments, including wind turbines -- not only, but including wind turbines. And that's how it reflects on these announcements.
And Pol, just the...
The other point is that a number of projects are offshore. And definitely now, the technology of choice for offshore is direct drive, and direct drive comes with a lot more magnets. So it means that magnet demand for wind turbines speaking, accelerate even faster than the overall wind turbine new projects because most of it is offshore or growing number is offshore.
Okay. Great. Can I just...
Pol, sorry. Can I just -- Pol, can we just maybe give Hayden a couple of comments on what we're seeing in China or in terms of whether the quotas are ahead or basically playing catch up to demand?
I think China is addressing quotas, it's a bit funny, with a focus on making sure there is enough risk for the growth downstream, where they are actually playing the game. And they look at what Lynas is doing, and they say, well, based on this, this is so much more production we need to make. So that's good news for us that we are considered very seriously as a reliable supplier, and that's the reason why we push as hard as possible to increase fast.
Now I mean the situation supply/demand, and we were reviewing that again last week, remains very tight because demand is accelerating as much as the quotas are increase. So we are not entering into oversupply. We are the lucky ones living in an environment where the demand grows very fast.
Okay. Great. And Amanda, just a second one. I know it's hard to talk about anything with the DoD, but just interested in the options for you guys in the U.S. Is it likely that they'll push for a heavy rare earths plant first and approve all of that, and you'll go and build that and then look at integrating sort of the light stream later on? Or are you still trying to do it all together?
Yes. We've been fairly clear about the fact that this is a single facility, right? And plan for one and then have to add other stuff to it, you may need to have that within your overall scope and design right from day 1. That's the conversation that we're having with the U.S. government.
I think I can say with a great deal of confidence that the U.S. government recognizes that Lynas is the only proven non-Chinese firm in this space, and we had provided all of the detailed information and then just going through the sort of appropriate processes at present.
For us, there's -- certainly expanding into the U.S. brings with it -- sort of we're working on the basis that there will be further development of the industry there. And whilst there's a degree of sort of base in that, on the other hand, some of the inquiries that we have from -- some of the inquiries that we have, particularly from magnet buyers in the U.S., either for supply or for partnership, give us a great degree of confidence.
Our next question comes from Daniel Morgan at Barrenjoey.
First question, can I just follow up on the very last thing you said, Amanda, on magnet buyers in the U.S. potentially talking about supply or partnership? Is it possible that you would be considering partnering and going downstream and getting involved in magnet making or metal making?
Anything's possible, Daniel, but we would not propose to say very simply, "Oh, let's just jump into magnet making." It is a different technology. It requires a different level of expertise and sort of manufacturing approach. It looks good on a spreadsheet. It's a bit more challenging to execute effectively.
Having said that, there are any number of -- there are a number of firms which do have expertise specifically in that area or had the sort of material science expertise on which they would be able to build. And so thinking about how -- what that looks like and how that looks having a rare earth separation facility in the U.S. makes most sense if there is a downstream market. We have for years worked with downstream processes to ensure that there is a robust outside China supply chain. And that's the sort of conversations we're having in the U.S. as well.
Okay. And then strategy to run the plant for the rest of the year. I mean you're close to full capacity in the quarter and very much on March, but you can't run at that level all year without an uplift in processing permits. Was that just striking while the iron is hot, produce while the price is strong? Or what are your plans for the rest of the year? Do you throttle back in the December quarter and do maintenance or something?
Our intention is to continue to operate at maximum rate. We have some carryover from the last couple of years, which is definitely helpful, and we continue to engage with our regulators in Malaysia.
Okay. So if you did not consume all of your permits last year, you can carry that over? It doesn't get extinguished in a year?
We have some approved carryover, yes.
Okay. And just the sales mix, I appreciate that you produced a lot more than I think anyone expected. But the average price received per kilo was a little bit lower than I expected. Is it possible to just ask about your sales mix? Did you sell sales mix? Did you sell more lanthanum and cerium in proportion versus NdPr in the quarter? Or can you just comment on sales mix?
Yes. No, it's less about the mix than it is about sort of the way that our contracts with our customers operate. We had some catch-up deliveries to make on quarter 2 purchases from some of our very significant customers. So the way that this works, we sell at the price that we contract to supply. It also means that we're sort of slower on the up, but we're also slower on the down. So that's really just -- this is just a reflection of the way that our contracts work which is different from just looking at a spot price on a day-by-day basis. We remain firmly of the view that having our strong contracts with our key customers is a much better thing for our business and our shareholders than selling into an uncertain spot market. Thanks, Daniel.
Our next question comes from Reg Spencer at Canaccord.
I'm not going to let the opportunity pass by without throwing in another football analogy. So I'm hoping you can help me tackle a couple of questions here, Amanda. So obviously, instruction activities picked up in Kalgoorlie. And I think last quarter, we had a discussion around what the capital expenditure rate is going to be as we lead into commissioning. I note that what was the expenditure in the quarter, if we could sort of back something at around the $30-odd million. When does that CapEx really start to ramp up? And what does that curve look like as we move through the next year and a bit?
Well, I'd say $30 million is a fair bit to spend, hey. We'll have a much bigger quarter this quarter. I would expect that it's going to be well in excess of double that.
As you look at where we've got to, and I think I've talked about this at the half yearly, I think that we've now committed well in excess of -- we've committed to almost all of our equipment, which is around about sort of $200 mill-plus and a lot of the civils work as well. So we have a very good view of sort of our pipeline and how we're going with our contracts versus our original budget. We got some overs, we've got some unders, and we're still well within the contingency even with the couple of scope increases on the project.
Okay. Great. Just very interested in your comments as well following some of the other guys talking about your production run rates, capacity utilizations. And you mentioned that part of plan at the moment would be to build up a stockpile ahead of commissioning at Kalgoorlie. What kind of inventory builds or stockpile would you be looking for as we move into Q1? And how does that gel with how we might look at potential production and sales volumes over the next 9 to 12 months?
Quite a big question, Reg. The answer, I'm happy because the stockpile is as big as we can make it. So we have isolated an area in Mt Weld, where we do have some product already on that stockpile. We are looking at other options for opportunities to store additional material. It's interesting to note that we probably had more on the stockpile at the end of the last quarter than we did this quarter. We've had to dig into some of it to continue to -- we've actually increased our concentrate inventory on-site in Malaysia for all the reasons that we've discussed previously with sort of uncertain logistics, et cetera. And so the fact that we had already started building that stockpile is an important part of that.
We really expect that we'll have, at a minimum, sort of maybe a quarter's worth of 2 cracking and leaching plants operating with Kalgoorlie in ramp-up mode. So it's not going to require twice as much, but it's certainly going to require that we've got material to feed it.
So Mt Weld has got a lot of our love and attention at present in terms of really being able to grow our throughput. And that how do we sort of incrementally increase the amount that we're pulling out there, but then also how do we make a step change.
Okay. So as we get closer to when Kalgoorlie commissions, if we are seeing any major increase in production rates, it's not as if all of that's going to initially be sold. You need some material to -- for commissioning, obviously, Kalgoorlie. That makes sense.
Just one last question for Amanda, comments around strong demand. I think we all kind of get what's going on there. Are you able to help me, and maybe one for Pol, but trying to connect the dots between short-term pricing movements and noting that, that NdPr prices has rolled over 18% to 20% over the last few weeks versus what's happening in demand. Is this just a short-term shift in customer behavior as to how they're thinking about inventory builds and what that means for price action? Just kind of curious for your comments around that stronger demand don't necessarily gel well with pricing falling over 20% in the last month or so.
Yes. I will let Pol make some comments on this as well. But I would just sort of remind you all because I know that you've had this experience. You'll tear your hair out if you try to create a perfect time series analysis on the rare earths market connecting supply, demand and price. It is still significantly affected by Chinese government policy. And whilst our evidence is that greater control in the Chinese market leads to improved pricing outcomes, at the same time, some of the rhetoric, which has come out of the Chinese government is that we see that a moderated price would be more beneficial to industry.
So I think that, that's what we've seen just over the last month or so. But we don't -- we are always alert to the fact that the Chinese government can still really influence price significantly, which is why we plan our business on the basis that we still need to be able to be successful even if the price is skinnier than it is at present. But I'll pass to Pol if he has any further comments that he would like to make.
Yes. I mean, yes, very right, price is decided by Chinese simply because they supply most of NdPr. Just one point to keep in mind, the fundamentals are unchanged. You have 1 year of continuous price increase and 2 weeks of price adjustment. So there is no conclusion to draw from a 2 weeks drop after 1 year increase. And keep in mind that 30% of the NdPr supply comes from recycling. Recycling factories, you basically collect swath from magnet making, mainly in China. And the way to make money is to buy low and sell high. So at some stage, all on your speculative mindset, you feel like the price might go down tomorrow, you sell. Or you need cash for whatever reason, and those days probably there are some difficulties in the Chinese economy. So you sell your inventory of ex recycling production.
And that is substantial. There is not so many markets that include the 30% loop of recycled product. And that often explains the short-term variations. And the discrepancy sometimes between supply, demand and price trend because, clearly, you have 30% that can be accumulated when people feel like the price will continue going up. And when they worry, they sell, they cash in, and then you have, short term, a bit of oversupply that is not changing the fundamentals.
That makes sense, Amanda, Pol. That 30% recycling number is a little larger than I might have understood, but perhaps we can take that conversation off-line.
People will say 25%, 30%. Doesn't change that. It's a lot.
So just to bear in mind, that's not from end-of-life products. That's from when you make that [indiscernible]. When you shape it, it's the off-cuts of the magnet basically. And it can be held and taken into making supply chain as those who are holding that material, too. And so like I said, Reg, we're highly alert to the fact that the price is always responsive to Chinese government policy. And the second thing that we see over many years, it's also highly responsive to speculation and sort of within the supply chain as well. But Pol's point, the fundamentals are strong, and we expect the fundamentals will remain strong. And who would have thought that we'd be looking at $130 a kilo price and say, "Oh, gosh, isn't the price a bit soft?"
Our next question comes from Trent Allen at CLSA.
Good result. Congratulations. Most of the good questions have been asked. So I'll just -- I'm curious, I think you referred to this before. Sales revenue does exceed cash receipts. Can we expect that to rebalance over the next couple of quarters and then eventually cash receipts exceed revenue? Is that the way it works? That's my first question.
So we have, I think, in the history of our company 0 bad debt. So the invoice will always ultimately convert cash.
So how long will it take, though? Is it the current quarter or does it arrive in a rush? Or does it kind of sort of smooth its way through over the next few quarters?
I'm looking at today's forecast, which has a pretty big number end for April, actually.
Sure. Okay. My second question is just out of interest around your interest payments, of course, USD 11.5 million not too much money for you guys these days, but you've deferred it. Is that just a gesture of goodwill from JARE or what's the reason for it?
As we indicated in the release, we continue to talk with JARE about our partnership moving forward. As I've indicated, we've got plenty of areas where we want to continue to develop the business, all of which helps to secure supply chains for the Japanese industry. And so as we're looking at those and opportunity for continued development of the JARE partnership, we reached the decision that it was best to just push this out while we completed some of those discussions.
Our next question comes from [ Robert Richardson ] at [ ClearView Retirement ].
Congratulations on your blinder of a quarter.
Yes. [ Bob ], thanks. I felt you must be coming on to ask a question because you had another analogy to throw in, yes?
Most of my concerns have been addressed. I'm encouraged to hear of progress with sort of discussions in Washington that you mentioned. Would I be correct in assuming that for practical political reasons, greater U.S. independence from China rare earths sources must lie with building facilities inside U.S.A. rather than here or Malaysia?
I think that, politically, that's definitely the choice. On the other hand, we're keen to ensure that everyone understands that any short-term demand, and I mean anything in under sort of about a 3-year time frame, has to come from the Malaysian facility. So everyone should be interested in what goes on in Malaysia.
Okay. Lastly then, does it look as though we're nearing the end of the cap that you've had for so long on production?
Pol and his team in Malaysia are absolutely -- yes, they are absolutely delivering an outstanding ongoing performance. It's certainly our intent to continue that. But in both locations in Malaysia and also in WA, we're continuing to deal with COVID restrictions that we're not seeing quite so much on, say, for example, on the East Coast of Australia. So I'm loathe -- anyway, you know this, I never give guidance. I'm loathe to give guidance, but the plant's running well. We've got strategies in place to deal with sort of the most difficult of the external conditions, and we're very pleased with the third quarter's production performance.
[Operator Instructions] Our next question comes from [ Tim Ainsworth ] at [ Telfain ].
Amanda, just circling back to some comments that you and Pol made -- it was over 18 months ago -- sorry, 12 months ago, I can't remember exactly when. But you noted that you weren't seeing any expansion of ex Chinese magnet makers, which is -- and that obviously included the Japanese magnet makers. Has that changed? Are you seeing any signs of capacity increases in the Western magnet makers?
[ Tim ], nice to hear from you. Certainly, Japanese magnet makers are increasing capacity. I'll let Pol once again talk to that specifically.
I'm not sure I can disclose what our customers are doing, but there is at least 1 magnet maker from Japan increasing substantially their production capacity. And that's the reason why our demand increased so much recently. But I can't -- I don't think I can mention more details on that. [indiscernible]. Nice to talk to you.
Pol, is there anything outside the -- your principal customers, the Japanese makers? Are you seeing anything in Europe or America or any solid plans towards initiating some NdFeB capacity?
There are some, let's say, conversation are more serious than before. So there are some real project being studied, but they are being studied. They are not building the facility yet, whereas Japanese are. And so for Japanese, a matter of months whereas for others, it's probably a matter of 1, 2 years.
Okay. That's encouraging.
Thanks, [ Tim ].
Thank you. We have no further questions. So Amanda, I'll pass it back to you.
Well, thank you all. Referee's blown the whistle. No, I promise not to subject you to this again. I'll find a different analogy. But thanks for your continued interest and support, and we're looking forward to bringing it home through to the end of the financial year.
Thank you very much, ladies and gentlemen. That does conclude the call for today. Thank you all for joining. You may now disconnect.